‘Too big for Australia’, says pension fund eyeing global expansion

SYDNEY (Reuters) – Australia’s biggest pension fund has outgrown the country and wants to quadruple in size to be a global investment powerhouse worth A$1 trillion ($700 billion) within a decade, its Chief Executive Officer said on Tuesday.

AustralianSuper, which has A$260 billion of the country’s retirement money under management, plans to invest up to 70% of its capital offshore to avoid “performance drag” by focusing on home, Paul Schroder said in a Reuters Newsmaker interview.

“We are too big for Australia,” Schroder told the online event.

“We consider ourselves a global investor with domestic beneficiaries. It is true we were far too Melbourne-centric and Australian orientated, but we are generally in all of our fibres taking the view that we are global investors.”

Australian pension fund managers have benefited from a system introduced in the 1980s under which employers must pay an additional 10.5% of staff wages as superannuation. That has left funds flush with money to invest, but with limited assets to purchase domestically.

AustralianSuper now has up to 70% of its funds managed offshore, according to Schroder. The organisation had 70 staff in a London office, with plans to triple that headcount. An office in New York, which was focused on private equity investing, was also growing, Schroder said.

The fund, which owns ports, airports, rail and road infrastructure in Australia, Europe and North America, has said it wants A$500 billion in assets by 2026, but Schroder said he was taking a longer view. Within a decade, he said, “we want to be a one trillion dollar investor”.

“We’re unashamedly in the business of scale,” he said.

AustralianSuper had no specific investment target but considered unlisted assets well-suited to its business in the current economic climate, since they typically carried “inflation protection”, Schroder said.

At a time of economic, geopolitical and logistical disruption, Schroder said the single biggest investment challenge was inflation, and he dismissed reports that rate increases by the U.S. Federal Reserve were starting to slow the overheated economy.

“You need to see some sustained signals to say it’s dealt with,” he said.

“Our view is that there’s some pretty tough times ahead. We think we’re in tight environment. The question is: what’s the rate of that tightening and is there a pivot around the corner?”

($1 = 1.4280 Australian dollars)

(Reporting by Byron Kaye; Editing by David Holmes)